Carbon Karma: How Companies Use Forests to Offset Pollution

Erica Grieder's weekly series explores how businesses are responding to consumers, governments, and markets to make their practices and their products more sustainable.

Why would you pay someone just to own a forest?

In the United States, at least, a handful of companies are buying forest carbon offsets—paying landowners to maximize the carbon- absorbing properties of their trees to offset the fossil fuel energy the companies rely on. They do it for corporate social responsibility reasons, to show leadership in the industry, or perhaps as a marketing move.

The biggest challenge is convincing companies that paying for offsets makes sense. “So far, it is purely a voluntary market,” says Keister Evans, president of Forest Carbon Offsets, a for-profit offsets outfit headquartered in Virginia.

One of the company's credit-purchasing customers is a travel company that sails to Central America. Forest Carbon Offsets has some projects there, so cruise ship customers may be attracted to the idea of their passage fees boosting a sustainability concern. In other cases, the company’s interest is more general; Texas-based Dell, for example, has a project with Conservation International to protect some 600,000 acres of forest in Madagascar, keeping half a million metric tons of carbon dioxide out of the atmosphere.

While “save the forests” has been a rallying cry for decades, the rise of forest carbon offsets as a business is quite new. During the United Nations’ 2007 climate change talks in Bali, the international community announced the Reducing Emissions from Deforestation and Forest Degradation program, which encourages reforestation and the creation of new forests, and establishes some standards toward bringing forest carbon closer to the mainstream. But REDD projects weren’t included in the Kyoto Protocol because of a sense among negotiators that forestry projects are too complex to be as attractive as other offsetting efforts, like renewable energy credits or efficiency improvements. Forest carbon is still a small part of the overall offsets market.

Forest carbon can be a tough sell to the landowners, too. It’s not that people in Kentucky or West Virginia don’t believe in climate change, says Scott Shouse, who manages a program called the Appalachian Carbon Partnership, but that after generations of business pitches—from the coal industry or timber companies—they’re a little leery when someone turns up promising to make them money on a slightly abstract investment. So Shouse gives interested landowners a low-key pitch: Get to know a forester. Not a forest ranger—a more common character in the area—a forester is an advocate, like a doctor or a lawyer: not always right, but highly trained and expert in their field. They’ll come look at your land, and if it looks like a good fit for the program, you can implement some sustainable forestry techniques and sell the carbon credits through the partnership. There’s some up-front cost, about $1,500 to cover the auditors who will figure out a management plan.

The offsets depend on rigorous oversight and compliance requirements. An initial inventory establishes how much carbon the trees are capturing, and determines whether a proposed project has “additionality”—whether active management would yield a greater net benefit. Recurring verification audits check that the project is proceeding as planned. In some cases, this entails a hike into the forest to see if a reference tree has grown as predicted by the models several years earlier.

If certain improvements are made—planting species with a greater carbon uptake, for example, or selective harvesting to foster a more sustainable growth cycle—more carbon will be sequestered on a homeowner's land, and companies will buy those offsets for the next 15 years. An acre of forested land sequesters perhaps three metric tons of carbon dioxide a year, each ton being worth one credit. At about $15 a credit, depending on market rates—Shouse’s partnership is a nonprofit, and takes a 10 percent cut—a landowner with a 100-acre plot could recoup her costs in about a year.

From an environmental perspective, forest carbon offsets are a clear winner: Trees hoover up carbon dioxide during photosynthesis and store it. (Conversely, deforestation is a major source of global greenhouse gas emissions.) Forests have huge benefits: They protect wildlife, water, soil, and livelihoods. Even aside from offsetting, people want to save the forests.

Regulations could change the business landscape pretty quickly. The failure of the 2009 cap-and-trade bill was disheartening for environmentalists who have high hopes for offsets—and for some industry interests, which would rather pick their offsets than get hit with a systemic carbon tax.

There is, however, movement on the state level; California plans to launch a cap-and-trade program next year, which will allow power plants, refineries and factories to meet up to 8 percent of their air- quality compliance obligations through offsets rather than emissions reductions. Other states might follow suit. Evans argues that carbon credits are a good investment; they can be traded, and if you believe regulations are forthcoming, now may be a time to buy low.

The forest carbon crowd did draw some hope from the United Nations’s recently-concluded climate-change talks, which saw renewed international enthusiasm for the idea of encouraging private companies to invest in carbon credits and interest in establishing more rigorous verification for same—although the practical impact of those discussions remains unclear.